EX-99.1 2 q205.htm or Release:

 Exhibit 99.1

 

For Release:              Immediately

Contact:                      Frank H. Boykin, Chief Financial Officer

 

 

MOHAWK INDUSTRIES, INC. ANNOUNCES

 SECOND QUARTER EARNINGS

 

 

Calhoun, Georgia, July 20, 2005 - Mohawk Industries, Inc. (NYSE:MHK) today announced 2005 second quarter net earnings of $93,811,000 and diluted earnings per share (EPS) of $1.39 (both 8% above last year).  This compares to $87,158,000 in net earnings and $1.29 in EPS for the second quarter of 2004.  Net sales for the quarter were $1,624,692,000 in 2005 compared to net sales of $1,485,897,000 in 2004, an increase of 9%.  The growth in EPS resulted from selling price increases, lower selling, general and administrative expenses as a percent of net sales and growing hard surface sales partially offset by continuing raw material and energy cost increases.  The net sales growth was attributable to price increases and internal growth.  The Mohawk segment net sales of $1,184,914,000 in the second quarter of 2005 were up 7% from $1,105,493,000.  This was primarily attributable to increases in prices as well as growth in commercial and hard surface sales. The Dal-Tile segment net sales of $439,778,000 in the second quarter grew 16% from $380,404,000 primarily as a result of internal growth and improved product mix.

EPS for the first half of 2005 was $2.42 and net earnings were $163,831,000 (both 7% above last year) compared to EPS of $2.27 and $153,465,000 in net earnings for the first half of 2004.  This increase in EPS and net earnings is attributable to selling price increases, lower selling, general and administrative expenses as a percent of net sales and growing hard surface sales partially offset by continuing raw material and energy cost increases.  Net sales for the first half of 2005 were $3,117,914,000, representing an 8% increase over the first half of 2004 sales of $2,875,622,000.  This sales growth was attributable to price increases and internal growth.


In commenting on the quarter results, Jeffrey S. Lorberbaum, Chairman and CEO, stated, "Mohawk turned in another strong performance for the quarter.  I am especially pleased with the excellent Dal-Tile performance which continues to exceed our expectations.  The 15.8% operating margin is one of the highest we have recorded.  Our investments in Dal-Tile including the expansion of our manufacturing plants in Muskogee and Mexico, adding distribution points and opening new design galleries are continuing as planned.  This should support continued growth in the ceramic tile business and increase capacity to satisfy our customers' requirements.

The Mohawk segment also reported good results for the quarter with both the commercial and residential new construction business expanding as demand remains strong.    We continue to broaden our carpet tile offerings through our Lees and Mohawk brands.  Carpet tile is a growing category among designers and architects.   Our retail replacement business was soft during the quarter as a result of fewer consumers shopping in retail stores.  Sales of our Home products are still under pressure as we have exited some marginal products and some customers have reduced their inventory levels.  The profitability is in line with the Mohawk segment and we are investigating alternatives to maximize our business.

Price increases were implemented in the second quarter as a result of raw material and energy cost increases.  This impacts our margins as the timing of price increases lags behind the cost increases.  Many of the raw material cost increases appear to have moderated during the quarter.  However, increases in oil costs and worldwide commodity demand could further affect our costs.

Our new SmartStrand™ carpet introduction with Dupont™ Sorona® is being implemented across the country and has been well received in the marketplace.   The product is targeted for the mid to high-end market with comprehensive merchandising and advertising programs.  Many of the sample displays are in the process of being installed across the country.  Additional products will be introduced by the end of the year.

I am also proud to announce that Mohawk won two awards at Neocon, the national commercial show, for innovative products in our Karastan and Lees divisions.  In addition, FloorCovering News presented Mohawk awards for the Carpet Manufacturer of the Year and the Overall Floorcovering Manufacturer of the Year.

We recently announced the acquisition of Unilin, who is leader in high-end laminate in both the U.S. and European market.  We expect to close in the fourth quarter this year.  This is the second significant step, after our 2002 Dal-Tile acquisition, in broadening our participation in the hard surface flooring market.  Unilin is the only fully integrated U.S. manufacturer with a history of innovation and cutting edge products.  Unilin's management will remain in place and lead our laminate efforts.

Our leverage at 24% debt to capitalization provided the opportunity to acquire Unilin.  We are in the process of obtaining regulatory approvals for the combination in the United States and Europe.  The combined management team is developing a long-term strategy to maximize our laminate business.  We expect the acquisition to be slightly accretive in 2006."

A strong housing market and declining unemployment continue to support the overall economy.  Our business in the residential new construction and commercial markets has continued to show strength.  Other economic factors such as high oil and gasoline prices have affected our retail replacement business.  Future raw material and energy prices are not predictable and may affect our industry.  After considering these factors, the third quarter earnings forecast is from $1.71 to $1.80 EPS.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies, proposed acquisitions, and similar matters, and those that include the words "believes," "anticipates," "forecasts," "estimates," or similar expressions constitute "forward-looking statements."  For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties.  The following important factors could cause future results to differ: changes in economic or industry conditions; competition; raw material and energy prices; timing and level of capital expenditures; integration of acquisitions; introduction of new products; rationalization of operations; and other risks identified in Mohawk's SEC reports and public announcements.

 

Mohawk is a leading supplier of flooring for both residential and commercial applications.  Mohawk offers a complete selection of broadloom carpet, ceramic tile, wood, stone, laminate, vinyl, rugs and other home products.  These products are marketed under the premier brands in the industry, which include Mohawk, Karastan, Ralph Lauren, Lees, Bigelow, Dal-Tile and American Olean.  Mohawk's unique merchandising and marketing assist our customers in creating the consumers' dream.  Mohawk provides a premium level of service with its own trucking fleet and over 250 local distribution locations. 

 

There will be a conference call Thursday, July 21, 2005 at 11:00 AM Eastern Time.

The telephone number to call is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local .

 A conference call replay will also be available until Friday, July 29, 2005 by dialing 1-800-642-1687

for US/local calls and (706) 645-9291 for international calls and entering Conference ID # 7842048.

 

DATE FOR FUTURE PRESS RELEASE AND CONFERENCE CALL:

 

PRESS RELEASE
CONFERENCE CALL

 

3rd QUARTER 2005

OCTOBER 19, 2005

OCTOBER 20, 2005

11:00AM (800-603-9255)
 

 


MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Earnings Data Three Months Ended Six Months Ended
(Amounts in thousands, except per share data) July 2, 2005 July 3, 2004 July 2, 2005 July 3, 2004
Net sales  $            1,624,692                   1,485,897                 3,117,914                   2,875,622 
Cost of sales                1,193,183                     1,082,578                   2,301,703                     2,106,757 
    Gross profit                   431,509                      403,319                    816,211                      768,865 
Selling, general and administrative expenses                   271,020                        252,646                      532,092                        499,153 
    Operating income                   160,489                      150,673                    284,119                      269,712 
Interest expense                     12,515                        13,212                      24,391                        27,166 
Other (income) expense, net                          922                               991                          2,926                            2,413 
    Earnings before income taxes                   147,052                      136,470                    256,802                      240,133 
Income taxes                     53,241                          49,312                        92,971                          86,668 
    Net earnings  $                 93,811                          87,158                      163,831                        153,465 
Basic earnings per share  $                     1.40                              1.31                            2.45                              2.30 
Weighted-average shares outstanding                     66,811                          66,742                        66,807                          66,686 
Diluted earnings per share  $                     1.39                              1.29                            2.42                              2.27 
Weighted-average common and dilutive
potential common shares outstanding                     67,504                          67,564                        67,598                          67,582 
Other Financial Information
(Amounts in thousands)
Net cash provided by operating activities  $               104,079                          54,421                      154,780                          57,682 
Depreciation & amortization  $                 31,497                        30,100                      63,762                        61,110 
Capital expenditures  $                 64,832                          25,507                        99,353                          38,674 
Consolidated Balance Sheet Data
(Amounts in thousands)
July 2, 2005 July 3, 2004
ASSETS
Current assets:
    Receivables  $               775,992                      698,852 
    Inventories                1,125,145                      926,396 
    Prepaid expenses                     49,125                        43,436 
    Deferred income taxes                             55,311                          84,260 
        Total current assets                2,005,573                   1,752,944 
Property, plant and equipment, net                   973,627                      899,458 
Goodwill                1,377,349                   1,376,381 
Other assets                           333,700                        339,287 
           $            4,690,249                     4,368,070 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt  $               183,835                      274,459 
Accounts payable and accrued expenses                           757,813                        715,074 
        Total current liabilities                   941,648                      989,533 
Long-term debt, less current portion                   700,000                      709,425 
Deferred income taxes and other long-term liabilities                           221,244                        213,911 
        Total liabilities                        1,862,892                     1,912,869 
Total stockholders' equity                        2,827,357                     2,455,201 
           $            4,690,249                     4,368,070 
Segment Information As of or for the Three Months Ended As of or for the Six Months Ended
(Amounts in thousands) July 2, 2005 July 3, 2004 July 2, 2005 July 3, 2004
Net sales:
    Mohawk  $            1,184,914                   1,105,493                 2,276,260                   2,135,935 
    Dal-Tile                   439,778                        380,404                      841,654                        739,687 
        Consolidated net sales  $            1,624,692                     1,485,897                   3,117,914                     2,875,622 
Operating income:
    Mohawk  $                 95,743                        97,050                    161,368                      168,822 
    Dal-Tile                     69,291                        55,895                    127,761                      105,297 
    Corporate and eliminations                      (4,545)                         (2,272)                        (5,010)                         (4,407)
        Consolidated operating income  $               160,489                        150,673                      284,119                        269,712 
Assets:
    Mohawk  $            2,492,341                   2,249,124 
    Dal-Tile                2,147,812                   2,035,850 
    Corporate and eliminations                             50,096                          83,096 
        Consolidated assets          $            4,690,249                     4,368,070